Interview: “Local Industries Perish, Employment Dwindles”
By Victorine BIY, Cameroon Tribune
Dr. Michael Forzeh Fossung, Certified Public Accountant, Lecturer of Accounting, General Manager of Kosan Crisplant Cameroon.
What justifies government’s decision to allow for goods like
sugar, milk, cement and vegetable oil to be imported when national
production could meet demand?
We must first clarify that national production of these basic
commodities and many others imported are currently insufficient to meet
demand. However, there is room
for the government to raise local
production to meet the needs of the local market but at what price? No
country today, even in the developed world, can be totally
self-sufficient without suffering a high cost. This leaves the need or
choice by the government to import goods especially basic necessities,
to be able to satisfy local demand. It is possible that goods or
services that satisfy domestic needs or wants can be produced more
inexpensively or efficiently by other countries, and therefore sold at
lower prices. This is the case of crude oil for instance. Cameroon will
continue to rely on imports to meet its petroleum needs into the
foreseable future. This, however, is not the same as saying that
Cameroon has no choice but to import crude oil from other countries. As
the preceding discussion suggests, there are
alternatives. Unfortunately, those alternatives are less economically
and politically feasible than simply continuing to import oil from
countries endowed with generous petroleum reserves and sophisticated
processing machinery and know-how.
The same holds true for other basic products like rice, vegetable oil
and so on whose domestic supply are currently limited. The government
can find ways to increase the production of such commodities or identify
domestic substitutes. These alternatives can prove to be more costly
than continuing to import from other countries. Many countries have
taken advantage of foreign competitive efficiency in various sectors and
for various products to satisfy local demand. Take the case of the
United States which has almost entirely stopped producing some goods
particularly in low-tech products and electronic equipments which are
produced by firms in other countries (notably Japan and China) faster,
more cheaply and sometimes, of better quality.
Other issues would be that of quality. All of these and many other
items that Cameroon imports from other countries are available through
the domestic market. However, some consumers believe that imported
versions of these items offer a level of quality that Cameroon varieties
do not have - A case in point is rice.
What is the impact on the sectors concerned?
The impact of importing goods like sugar, milk, cement and vegetable
oils are significant both positive and negative. Taking the case of
cement which is an important input for construction and infrastructure
development, underpins growth and industrialisation as well as private
sector development, and represents a significant proportion of
government spending in Cameroon, the price and availability of cement
cannot be overemphasised. The cement sector, for instance, is one that
is often concentrated because of the cost structure and high minimum
efficient scale of production despite the new entrant of Dangote in the
industry.
Cameroon's demand for cement has risen dramatically despite the
increasing volume of imports and local production, according to the
Ministry of Economy and Planning, Cameroon's cement demand grows by 8
per cent per annum and the country currently has a deficit of 2.5-3
million tonnes. In 2014, local cement production was estimated at 1.3Mt
and imports were around 1.2 million tonnes. This increase in demand if
matched with local production would have increased significantly the
level of national employment, but this is not the case.
Despite the government's bid to ban imports to boost domestic
production, foreign producers continue to have significant market share
in the country, importing to almost 1.3 million tonnes in 2014 compared
with 561,190 tonnes of cement in 2011. This significant increase in
importation has reduced the economic potential of cement consumers in
the sense that imported cement turns to be more expensive. Import duties
paid to the government treasury is not matched with the external
financing consumers incur. It is for some reasons like this that the
government issued a ban of cement importation in April 2015. Cameroon's
cement production is presently estimated at 3.6 million tonnes/yr.
Continuous importation of cement into the country reduces the
economic potential of national cement companies and also increases the
export earnings of the countries from whom such imports originate.
Besides, the local industry perishes and employment dwindles.
How serious is the impact on the balance of payment/trade of Cameroon?
Very serious-very negative! On a national level, in most countries
international trade and importing goods represents a significant share
of the national income. International trade has a significant economic,
social, and political importance in many countries. It is needless to
say that for Cameroon to maintain a favourable balance of payment, there
should be an increase in export over import. Therefore, the government
should take measures to reduce imports. For locally made goods, the
government should find sustainable cost effective means to boost
national production to meet demand.
The National Balance of Payment Technical Committee in the
Ministry of Finance has disclosed a FCFA 700 billion trade deficit
between Cameroon and its foreign trading partners in 2014 as against 500
in 2013. Should this figure be taken seriously by a country like
Cameroon that is aiming at achieving a middle-income economy by 2035?
In principle, there is nothing wrong with a trade deficit and should
not be a call for concern if the excess of imports is financing future
economic growth. In the short term, if a country is importing a high
volume of goods and services, this is a boost to living standards
because it allows consumers to buy more consumer durables. The deficit
might also be the result of importing much needed capital equipment that
will boost a country's productive capacity in the long run. Imports of
capital goods may increase the trade deficit in the short run, but there
will be long term benefits in terms of increased domestic production
and exports. Provided productive investments are made, this gives a
country the extra capital to drive future GDP growth so it can repay
foreign lenders. So, as long as the economy as a whole is growing faster
at an annual percentage in real terms than the current account deficit
is a percentage of GDP then the deficit will not be a problem. In a
growing economy like Africa and expesicially Cameroon, a budget deficit
is an operational tool and it is welcome - It is normal for the
Government to plan to spend more than it collects.
On the downside, a trade deficit however means that Cameroon must
rely on foreign direct investments or borrow money to make up the
difference. For Cameroon envisaging to emerge by 2035, sustained
deficits are a real problem as countries from whom Cameroon borrows to
finance these deficits will at some point require repayment with
interests. Failure to do so may hamper borrowing options/opportunities
from other countries and institutions.
To avoid other negative results of sustained deficits such as low
standards of living in the long term, loss of jobs in home-based
industries, a drop in the value of the FCFA, inflation, capital
flight, a strain on foreign currency reserves etc, the government will
therefore have to watch closely, the reasons behind this increasing
deficit. |
What could be the best approach to valorising/promoting made in Cameroon goods?
The preference for imported versions of products made locally is a
real problem for Cameroon and many African countries. Promoting the use
of domestically produced goods in a globalised economy with
sophisticated taste and demand is a challenging task.
There is therefore, a big challenge for industrialists to be
innovative and embrace modern technology to produce goods that match
standards and stay competitive with western products. However, the
manufacturing industries cannot develop if local consumers do not buy
the produce.
From this standpoint, one of the most cost effective ways to boost
the demand of locally manufactured goods would be moral suasion and
patrotism, appealing to peoples’ conscience to chose and use local goods
rather than imported goods. This, though, can only work in some sectors
of the economy and requires other supporting policy incentives and
disincentives to make much impact. While such a crusade can influence
taste, it may not be able to do anything about other factors. The main
reasons for the high demand for imported goods are changing technology,
changing tastes, non availability of domestic substitutes, high cost and
poor quality. The limitation is the perceived low quality of made in
Cameroon products. Industries have to be supported to improve quality
and standards and still maintain competitiveness in terms of costs of
inputs and products.
There is also the need to do more research on local produce and
support TV programs which would show and compare the benefits of common
Cameroon products and imported substitutes. The public/private
partnership should be encouraged. The government can partner with
business departments of various universities to design programs and
strategies to promote Made in Cameroon goods.
Moral suasion has to be complemented with more radical policies such
as local content requirement and special tariffs. Beyond foreign
investors, all contractors, beneficiaries of government funded projects
and public officials executing government projects should all be made to
demonstrate local contents of their material inputs. Even supermarkets
should be compelled or made to sign up to deals to stock and promote
Made in Cameroon goods. Ban and embargo may be out of place in the
current global environment but specific special tariffs can be used. For
example if we want to promote the consumption of local chicken, which
is actually healthier and tastes better, the government can impose
specific tariffs on frozen chicken and channel the revenue into grants
to support the poultry industry.
What adequate measures should the country take for its balance of
payment not to remain in the negative as has been the past years?
The government of Cameroon has already taken some active steps by
privatising some inefficient white elephant public sector companies to
allow fresh capacity in investments by private sector. More exports can
be encouraged by enhancing further the customs procedures and processes,
improvement of the efficiency of the Douala port, and perhaps a lower
tax rate on income out of exports. While encourage exports, reducing
imports by encouraging the consumption of made in Cameroon goods will
also go a long way.On the capital side, the government can encourage
foreign investments mostly in the form of equity of companies and not
much fresh debt inflows from abroad. Otherwise, discourage foreign debt
investments using political actions such as lowering interest rates,
increased taxes on business and more stringent regulations. The
government can direct trade deficits to financing investments that will
generate long term growth in GDP. A drastic measure to reduce the
current account deficit would be to give a long term tax
holday/incentives, including subsidies, and reduction of excise duties
to industries producing locally. A corresponding increase in import
duties should be decreed on imported goods, which are produced and
available locally. For goods that Cameroon needs importation of a
certain quantity, to meet national demand, a quota for that quantity
should be put in place.
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